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Timber a Solid Investment

Commodity investing has gained favor over the last few years, but what sectors have proven the most profitable? According to Jared Cummans, a senior analyst with investment publication CommodityHQ, timber is well worth today’s investor’s while. Cummans writes:

“At first, timber may seem like an unorthodox idea. … In fact, timber’s performance has been very strong throughout its history.”

He adds that the price of timber has increased by an average of 5 percent over the last century, with particularly strong performances during tough economic times. Timber has also outpaced the S&P 500 since the beginning of the twentieth century, increasing by a strong 15 percent yearly since 1987. Strong international demand, he says, gives this commodity particular punch.

Cummans suggests several popular ways to play in the timber market. These include random length lumber and softwood pulp in addition to firms such as the Weyerhaeuser Co., Plum Creek Timber Co., and Deltic Timber Corp. Also noted are the S&P Global Timber & Forestry Index Fund, which have approximately 35 holdings, as well as the Guggenheim Timber ETF, which has more than 25 total holdings and $116 million in assets.

If you’re interested in integrating Timber into your portfolio or want to learn more about commodities in general, drop us a line or give us a buzz in the office.

Restrict Your Risk Taking

Only 15% of Professional Athletes Are On This List…

If given the option between standing out or being part of a statistic, few athletes are going to elect to be part of the minority. In sports, being one of a small percentage typically means being at the top of the list, breaking a record, or accomplishing a feat that has never been done before. Yet, despite this mentality during game time, 85% of professional athletes find themselves in a statistic that poses the threat to jeopardize their future – specifically their financial future.

With coaches and trainers in place for every aspect of perfecting their sport, it is surprising to learn that only 15% of professional athletes have a financial advisor in place. In the NHL, most players are active for less than 15 years, meaning that by the age of 30 many are already retired. So, the question becomes how to stretch 15 years of income for the average 50+ years of retirement that comes after?

Without a financial plan, it is no mystery that the majority of ex-professional athletes find themselves in some sort of financial stress in the years post-sport. Financial stresses that are easily avoidable with a financial game plan in place. A financial game plan that will help you to adapt your lifestyle now in order to be focused on longevity – not just temporary luxury.

In many cases, the need to downsize day-to-day expenses is the first step towards putting a long-term financial plan in place. In the NHL, the average salary is $2.4M, yet many players spend more than half that amount solely in maintaining an excessive lifestyle. Want to maintain this lifestyle post retirement? Difficult to do. It would require approximately $25M in savings and investments. Few are in the position to put that level of money aside during a short sports career, and less likely without the help of a financial advisor.

It is important to work with a team of financial professionals who are specifically educated in the unique investment needs of professional athletes. We have further customized our PIMS five step process in order to ensure we are able to construct a financial plan that will grow with an athlete’s distinct income structure.

Our team will work to educate you in understanding financial vocabulary and learning different ways to grow your money. Simple measures like placing income in charitable trusts or family foundations make it possible to generate future income while supporting a favorite cause, while also producing a large tax deduction. Thus, saving you money.

In working with PIMS, or any financial advisor, make sure that your money manager has identified the best money management strategies in respect to your personal objectives and vision for the future. We accomplish this for our clients by not only drawing from our internal team, but also from our network of global planners to coordinate your all-star financial team that may include a CPA, estate planning attorneys, and insurance professionals. Each dedicated to executing their part of a customized financial plan that allows your money to work for you, instead of you working for your money.

We work with our clients to start planning now to avoid common financial pitfalls faced by the majority of former professional athletes and are committed to helping you to enjoy the rewards of your professional career many years after the last whistle has blown.

The Perfect Coach.

Would You Let Someone Who Had Never Played The Sport
Tell You How to Run Your Game?

The first coach for many athletes came in the form of a father, favorite uncle, or neighborhood aficionado for your sport of choice. While this might have been the perfect fit for the beginning stages of a budding athletic career, each progression to the next level likely reduced the ability of this familiar face to stay on the sidelines as your coach or trainer. To get to the professional level, a professional guide is usually an important piece of the puzzle. True on the field and certainly true off the field as well when it comes to managing your money.

Would you accept sporting advice from someone who had never played your sport? Well, why would you accept financial advice from someone not professionally qualified as a financial advisor? Athletes are quick to make sure they have the best trainers, coaches, and doctors in their corner in order to support the longest and healthiest career possible, but fail to apply the same commitment when considering a financial management team.

Separating the line between your personal support team and your financial planning team is an important distinction. The root of many poor financial decisions that athletes make when they come into the instant wealth that often accompanies a professional sports contract are a direct result of bad advice. A best friend or family member might have the best of intentions, but if they are not qualified to manage money it makes it hard to make the best decisions for your future.

A financial advisor is your money coach, but also a person that will ensure your best interests are the priority whether the conversation is regarding your childhood best friend’s new business idea that they want you to consider as an investment, or if it is dialoguing with your agent about your next contract.

Our team applies the Modern Portfolio Theory with all of our clients as we engage in a careful examination of the expected return and risk of each investment opportunity on behalf of all of our clients. This allows us to create a custom asset allocation that is working for you years after your playing days are over.

While our commitment to client services is intimate in its approach, our access and alliances with some of the industry providers of the best financial products in the market allow us to assure you that you have accessed to the widest range of investment options that exist in the global market.

Settling for less on the field may cost you success in your sport. Settling for less in a financial planner may cost you everything. We at PIMS work with you to make sure that is not an option.

Divorce Proof. Protecting Yourself Before You Walk Down the Aisle.

While professional athletes get married at the same rate as the general population (approximately 75%), the divorce rate is significantly higher (as high as 80% according to some recent studies).  The NFL Players Association released the staggering statistic that more than 50% of marriages of former professional football players end in divorce during their first retirement year alone!  While other sports leagues don’t necessarily have numbers quite as extreme, the same dynamics are at play for all elite athletes due to the unique lifestyles created by a life in professional sports.

Spending a great majority of the year on the road or sequestered in training and throughout the season is taxing on the most solid of relationships, so it is no surprise that divorce is more common for couples living a lifestyle controlled by a sports calendar.

This harsh reality makes it pertinent for athletes to put a financial plan into place prior to walking down the aisle.  Financial planning is not only in preparation for the worst case scenario, we work with our professional athlete clients to ensure they are protected for all scenario.  This means to not only be prepared in the case of divorce – but to also be prepared for your growing family’s future as well.  A solid financial plan, that may or may not include a prenuptial agreement, living trust, irrevocable trust, dynasty trust and qualified personal resident trust will keep you protected.

Without a financial plan in place prior to getting married, losing half of your net worth to your former spouse is a distinct possibility in the case of divorce.  This tremendous level of loss leads to an increased risk for bankruptcy in many cases.  A consequence that can be avoided with simple steps, like putting money made prior to getting married in a separate trust, ensuring that all of money made prior to saying “I do” is not considered marital property.

Our PIMS team works with you to stay practical and be prepared for all scenarios.  We strive to take the discomfort out of future planning conversations so you are prepared for the unexpected.

New Rules Take the Mystery Out of 401(k) Fees

Here’s some refreshing news about your 401(k).

The U.S. Department of Labor’s (DOL) Employee Benefits Security Administration (EBSA) has published “Reasonable Contract or Arrangement Under Section 408(b)(2) – Fee Disclosure.” This new regulation requires 401(k) plans to disclose to plan sponsors the administrative and investment costs associated with their plans. It also requires 401(k) plans to tell participants what services they’re charging you for and how much they’re charging on an annual basis. The new rules take effect in late August. SmartMoney has an excellent article on making sense of these changes here.

What’s so novel about these new rules? Until now, plan sponsors and participants have had difficulty finding the true costs of their 401(k) plans. This new regulation essentially offers an itemized receipt.

And while retirement plan experts seem to agree that it’s a great thing, they also concede that it will produce more disclosures that people probably won’t read. What is exciting is the potential effect this could have on the 401(k) marketplace. In fact, Schwab has already announced a new 401(k) offering built around low-cost index funds.
Still, you may be asking yourself, what’s the big deal? Well, what you don’t know can hurt you. In 2009, the Government Accountability Office (GAO) released a report on retirement plans that included this shocker: Over a 20-year period, a 1% point increase in fees and expenses would reduce a participant’s ending balance by over 17%. In other words, if you had an expensive retirement plan, you could be delaying your retirement for years, with a good amount of that money going straight into your 401(k) provider’s pocket. It makes sense that providers have fought this regulation as it makes it harder for them to make as much money as they have in the past.
I believe that investors shouldn’t have to do detective work to find out how much they’re paying to have their investments managed, and this is a big step toward shining the light on fees inside 401(k) plans. Let me know your thoughts or if you need assistance in finding out what your 401(k) plan fees are and how you may be able to reduce them.

When Investor Instincts Lead to Sabotage

This piece from the New York Times aligns well with our approach to investing. We work with investors who are more interested in having a simple, diversified portfolio that reflects their risk preferences, rather than those who attempt to time the market.
The article talks about the ideas in behavioral finance expert Daniel Kahneman’s new book Thinking Fast and Slow. Most behavioral finance theorists would agree that the most rational approach is to develop a portfolio that corresponds with the amount of risk that you can afford, make sure it aligns with your particular objectives (retirement, planning for college, etc.), and then don’t think about it too much.
However, for most investors, this goes against our nature. We worry. We wonder if we should be doing what our neighbor is doing. We don’t wan to miss out on the next big thing. This is a product of our impulse-driven “lizard brain,” the part of us that seeks short-term gratification and is motivated by fear or greed.
The role of the financial advisor is to help you fight these investment impulses and retain that rational perspective for the long run. How do we do it? The best start is to personalize your portfolio with your specific risk preferences and balanced, diversified investments that will serve you well over the long term (with periodic rebalancing, of course).

Whatever Happened to the Rainy Day Fund?

Mint.com has an interesting infographic that shows how (un)prepared Americans are for unexpected expenses. It seems the rainy day fund—once the cornerstone of financial independence—is a thing of the past for many. According to Mint, 50% of Americans would have difficulty coming up with $2,000 to cover an unexpected expense. It begs the question: how confident are you in your emergency fund?